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15 Jan 2015
ECB QE: A case of ‘when’ and ‘how’ - DB
FXStreet (Barcelona) - The Deutsche Bank Team views that it is no longer a case of ‘if’ the ECB implements a sovereign QE programme, but ‘when’ and ‘how’, and further expect Draghi to announce QE on 5th March and not on ECB’s 22nd January.
Key Quotes
“It is a close call — a very close call — but we believe the formal announcement of public QE will be on 5 March, not on 22 January. However, timing might not be important.”
“To avoid market disappointment, we expect Draghi to send a clear signal on 22 January of imminent QE. For example, he could say there is a majority or broad consensus for changing the composition of asset purchases but that the formal vote awaits the final input on design of the staff committees in March.”
“Even if we are wrong and a formal vote to engage in broader QE happens on 22 January, we think the full details are likely to wait until March.”
“We expect: a broad-based asset purchase programme, encompassing investment grade corporate bonds as well as sovereign bonds; no target size to be set for the sovereign purchases; the ECB to conduct the purchasing over a two year period at least, in line with the ABS and covered bond purchases; the ECB to purchase the sovereign bonds of all member states in proportion to the Capital Key subject to the above 25% CAC cap; sub-investment grade countries will need to be under a programme; and the bonds purchased to go beyond the OMT limit of three years but not beyond ten years.”
Key Quotes
“It is a close call — a very close call — but we believe the formal announcement of public QE will be on 5 March, not on 22 January. However, timing might not be important.”
“To avoid market disappointment, we expect Draghi to send a clear signal on 22 January of imminent QE. For example, he could say there is a majority or broad consensus for changing the composition of asset purchases but that the formal vote awaits the final input on design of the staff committees in March.”
“Even if we are wrong and a formal vote to engage in broader QE happens on 22 January, we think the full details are likely to wait until March.”
“We expect: a broad-based asset purchase programme, encompassing investment grade corporate bonds as well as sovereign bonds; no target size to be set for the sovereign purchases; the ECB to conduct the purchasing over a two year period at least, in line with the ABS and covered bond purchases; the ECB to purchase the sovereign bonds of all member states in proportion to the Capital Key subject to the above 25% CAC cap; sub-investment grade countries will need to be under a programme; and the bonds purchased to go beyond the OMT limit of three years but not beyond ten years.”